A living wage makes good business sense
Published: February 2017. | Last reviewed: May 2018.
Discussions about charity executives' salaries have raised many hackles — but conversations are also turning to lower-ranking staff. With good reason: one survey in 2015 among third sector workers by SCVO found that two in five respondents were unhappy about pay. Only half believed they were paid a fair wage, and two thirds thought they were paid lower wages than people doing similar work in other sectors.
Incentives to raise nonprofit salaries may be limited. Budgets are eternally squeezed, while demand even for low-paying jobs remains high. But many nonprofits are revisiting their compensation policies, not least to ensure they practice what they preach.
As one HR boss put it (quoted in the Guardian): "If you're an organisation that is making a point about poverty, fairness, equity, equality ... then it is important that you keep your own house in order."
It's a criminal offence to pay below the legal minimum wage. As of 2018, this is £7.83 per hour for those older than age 25, with lower rates for younger workers and apprentices. But campaigners say these amounts are calculated according to what employers can afford, not what employees and their families actually need to live. According to the Living Wage Foundation, a fair minimum is in fact £8.75 per hour (or £10.75 in London) for all workers age 18 or older.
The Living Wage Foundation argues that committing to this living wage has significant business benefits, including better programme delivery, retention and staff morale. Meanwhile, research commissioned by Trust for London found that at living wage workplaces:
- Staff turnover was reduced: average leaving rates fell by 25 percent
- 54 percent of workers felt more positive about their workplace
- 52 percent were more positive about their employer
- 32 percent felt it improved their family life
Many employers large and small (including nearly 500 charities, as of December 2016) have now signed up to this voluntary standard. And some funders — including some of the largest in the UK, such as Lloyds Bank Foundation and Comic Relief — are on board and have agreed to pay living wage rates to grant-funded posts.
Aside from paying a living wage, how else can your organisation offer fairer compensation — and live up to its values?
Raise the lowest wages
Whether or not you've adjusted to the living wage, consider raising the wages of your lowest-paid staff — particularly those in critical or frontline roles where retention is an issue. A raise, or a pledge to raise pay gradually over a period of time, can do much for staff morale.
Flexible work terms and benefits
Many workers miss out on benefits that are part of their employment package simply because they're unaware of them or don't take time to understand them. This can range from pensions, childcare and insurance to funding for professional training or options for paid leave to volunteer for a few days. Ensure you communicate these regularly: hold meetings and distribute materials to explain what options are available and how employees can access them.
Make sure to also explain any flexible working options, whether that's flexitime, compressed hours or occasional days working from home. Flexibility can make a big difference to a worker's well-being, productivity and job satisfaction.
In reviewing your pay rates, check how you compare to similar organisations. You might ask peers or partner organisations directly, or check sources such as salary surveys from specialist nonprofit sector recruiters. Consider other compensation best practices, too.
Make sure your senior executive pay is appropriate, too, and consider how it compares to your lowest-paid staff. Médecins sans Frontières in the UK, for example, uses a 3:1 ratio to guide its chief executive remuneration policy — the current CEO earns just over three times the amount of the charity's lowest-paid staff. Ratios in charities in general are typically between 3:1 and 5:1, according to ACEVO (the Association of Chief Executives of Voluntary Organisations) — much lower than in other sectors of the economy.
Either way, you should know how your highest-paid salaries compare to similar organisations. If you're paying above average, be prepared to explain why. Many in the sector are moving toward greater transparency.
- All charities employing staff should consider publishing the precise pay, job titles and names of their highest-paid people, while larger charities should make this a policy
- This information, as well as an explanation justifying the amounts paid, should be included in the organisation's annual accounts and be easily accessible on its website
Living wage foundation
If you're paying a living wage, be sure to communicate this in job advertisements and on relevant pages of your website. You can also encourage any suppliers or contractors to pay fair rates, too, by choosing to work only with those who do so.
Employers who reach a certain standard — under which any contractors they work with (such as cleaners, caterers or security staff) also receive the living wage — have the option to become accredited by the Living Wage Foundation.
This article draws on the expertise of YourPeople, a UK-based firm that provides outsourced human resources services across all sectors.
Looking for US-specific guidance? Read about paying a living wage in the U.S.